We are in the thick of the earnings season with more than 64.2% of the index’s total market capitalization having already released their quarterly numbers. Meanwhile, in the MedTech space, uncertainty related to the Trump administration’s Obamacare repeal & replacement effort continues to make headlines. The latest uproar is related to the President’s newly-released executive order, designed to provide affordable quality healthcare to the nation.
Let us now have a quick look at how the medical device space has fared so far in the reporting cycle. Q3 Performance Various reports suggest that hurricanes at the end of the third quarter are likely to mar revenues and earnings of several MedTech companies, primarily in Florida, Texas and Puerto Rico. MedTech major Ecolab ( ECL Quick Quote ECL - Free Report) expects the impact of the hurricanes on full-year sales and costs to be approximately 8 cents per share. In fact, Medtronic ( MDT) acknowledged the impact of the Hurricane Maria on its quarterly metrics. The company expects almost $250 million impact on revenues and earnings. The overall lack of visibility befuddles the favorable trend of the past few quarters in the broader Medical sector (one of the 16 Zacks sectors). Per the latest Earnings Preview, the third-quarter expected earnings growth rate for the sector is 5.2% on 4.8% revenue growth. In comparison, the reported earnings growth rate of second-quarter 2017 was quite impressive at 7% on 4.4% revenue growth. To note, there are some powerful long-term tailwinds in the medical space, including mergers & acquisitions (M&A), emerging market expansion, positive demographic trends and new product innovation. These have been a major driving force behind the sector’s impressive performance over the past few quarters even amid severe socio-economic and political instabilities. How to Make the Right Pick? With the existence of a number of industry players, finding the right stocks that have the potential to beat earnings could be a daunting task. Our proprietary methodology makes it fairly simple for you. You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.
Earnings ESP is our proprietary methodology to determine which stocks have the best chance to surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that 70% of stocks with this combination have the chance of a positive earnings surprise. An earnings beat boosts investor confidence in the stock, which is reflected in its rapid price appreciation. You can uncover the best stocks to buy or sell before they report with our
Earnings ESP Filter. Our Choices Below are four Medical Device players that have the right combination of elements to post an earnings beat this quarter: Henry Schein, Inc. ( HSIC) – Headquartered in Melville, NY, Henry Schein is a leading distributor of health care products and services across the globe. The company serves office-based dental, medical and animal health practitioners, dental laboratories, government as well as institutional health care clinics and other alternate-care sites. Henry Schein, which is expected to report third-quarter 2017 earnings on Nov 6, has beaten the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive earnings surprise of 2.79%. This Zacks Rank #3 stock has an Earnings ESP of +1.00%. You can see the complete list of today’s Zacks #1 Rank stocks here. T2 Biosystems, Inc. ( TTOO) – This is an emerging player in the field of in vitro diagnostics. The company is focused on providing better healthcare and reducing the cost of healthcare by empowering clinicians to effectively treat patients faster than ever before. The company is set to report third-quarter 2017 results on Nov 2. The company has missed the Zacks Consensus Estimate in three of the preceding four quarters, resulting in an average earnings miss of 0.76%. Currently, the company has an Earnings ESP of +4.83% and carries a Zacks Rank #2. Opko Health, Inc. ( OPK) – This is a diversified healthcare company. Its diagnostics business includes BioReference Laboratories, one of the leading clinical laboratories in the United States with a core genetic testing business. Opko, which is expected to report third-quarter 2017 earnings on Nov 6, has beaten the Zacks Consensus Estimate in three out of the trailing four quarters, delivering an average positive earnings surprise of 15%. This Zacks Rank #3 stock has an Earnings ESP of +47.06%. ICU Medical, Inc. ( ICUI): The company develops, manufactures and sells advanced medical devices used in vascular therapy and critical care applications. Its product portfolio includes IV smart pumps, sets, connectors, closed transfer devices for hazardous drugs, cardiac monitoring systems, along with pain management and safety software technology. ICU Medical is set to report third-quarter 2017 results on Nov 2. The company has surpassed the Zacks Consensus Estimate in each of the preceding four quarters, with an average earnings beat of 74.6%. Currently, the company has an Earnings ESP of +6.21% and carries a Zacks Rank #3. More Stock News: This Is Bigger than the iPhone! It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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